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SAIC Volkswagen starts building $2.5 billion China plant

Volkswagen‘s China venture with SAIC Motor has started constructing a $2.5 billion new energy vehicle (NEV) plant in Shanghai, that will make automaker’s luxury Audi brand cars, a potential first for the venture.

The new plant is a major step for Audi to diversify production of its cars in the world’s largest auto market from its long-standing local partner, China FAW Group. This shift has been delayed amid resistance from regional dealers.

SAIC Volkswagen stated the new plant would have a yearly capacity to make 300,000 cars and start production from 2020. Audi sold 481,387 vehicles in China from January to September in 2018.

Audi revealed the strategy to bolster ties with SAIC in late 2016. Previously this year the Germany luxury automaker bought a 1 percent stake in the SAIC Volkswagen venture, leading the way for the joint venture to manufacture and sell Audi cars.

Volkswagen presently gets a bigger proportion of the proceeds from the 50-50 tie-up with SAIC than from its 40 percent stake in the collaboration with FAW.

SAIC Volkswagen stated on Friday the plant would cost 17 billion yuan ($2.5 billion) and would make VW and Skoda models along with Audi cars. It will help VW tap China’s fast-growing market for NEVs, a category makes up electric battery vehicles and plug-in electric hybrid vehicles.

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